The False Claims Act: A Model for Success

By all measures, the federal False Claims Act — the gold standard of whistleblower laws that dates back to the Civil War era — has been an unqualified success. By providing powerful incentives for those who know of fraud against the government to speak out, the statute has enabled the recovery of more than $34 billion since it was substantially amended in 1986. But perhaps the most striking acknowledgements of the law’s continued relevance in the 21st century have been the moves by Congress and many states to expand the web of laws based on the False Claims Act – and most importantly the concept of using whistleblowers to help recover ill-gotten gains.

“The False Claims Act — particularly its whistleblower provisions — has proven a remarkably effective tool in the fight against fraud and other bad behavior that costs the government and consumers billions of dollars,” says Jeffrey F. Keller, a founding partner at Keller Grover, a nationally recognized labor and employment law firm, and a veteran whistleblower lawyer. “So it’s not surprising to see the ideas and goals of that statute form the basis for other laws.”

Whistleblowers, Keller explains, are courageous people. “These people frequently find themselves as unwitting witnesses to a fraud. Their moral compass tells them they need to speak up and expose this, but they face intense pressure to stay quiet and play along. They take a lot of personal risk to swim against the current and not bow to that pressure. ” the whistleblower lawyer says. “By providing financial incentives to come forward — by letting the whistleblower share in the recovery — the False Claims Act gives them a stake in doing the right thing. It works, and Congress and the states see that it works.”

To date, laws modeled after the False Claims Act have been passed in 29 states and the District of Columbia. Meanwhile, on a federal level, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 which notably called for the creation of strong whistleblower programs at both the Securities and Exchange Commission and the Commodities Future Trading Commission to help root out fraud which causes harm to shareholders and those who count on the integrity of our financial markets. In addition, there is a whistleblower program at the Internal Revenue Service designed to help that agency identify tax cheats. All these programs will make awards to a whistleblower who provides the federal agency with information that leads to agency action against someone engaged in fraud.

“All of these state and federal programs share an important thread,” says Keller, whose law firm is based in San Francisco and Los Angeles. “They acknowledge that the government’s regulatory agencies couldn’t find this unlawful conduct without the help of whistleblowers. And they recognize that giving the whistleblowers a stake in the recovery is a fair exchange for the personal risks these individuals take in stepping forward with what they know. When you see something work, you build on it. That’s what we’re seeing with the whistleblower laws in the 21st century”